Cryptoindex 100 analysis (CIX100)Introduction
Cryptoindex 100 is an index of top 100 coins, obtained from a proprietary algorithm called "Zorax" .
"Over 1,800 coins are put through our fixed set of filters, which provides around 500 coins as a rough output. Data is collected from cryptocurrency exchanges, news, social media, such as Twitter, GitHub, and other sources.
The collated data is used to extract over 200 factors that create a refined ranking in the index. Then, the factors are fed into the neural network, creating a final rating of coins, with the top 100 coins making up the Cryptoindex 100".
Graphic Analysis
The index is testing the resistance of 2.
In a bullish scenario, it needs to break through the diagonal white line and still move through the 200 simple and exponential moving averages.
CIX100 trade ideas
The secret tool that institutional investors use Recent news of potential attacks on wallet applications built on the Solana ecosystem, resulting in lost funds, has once again highlighted the long-running problems around the difficulties in securing hot wallets1. As a reminder, "hot wallets" involve storing private keys used to sign digital assets transactions, on a computer or phone connected to the internet. This provides users with a convenient way to send, store and receive digital assets. However, they can also be hacked… and the digital assets lost.
The emergence of institutional demand for digital assets has brought with it all kinds of questions around access, security, liquidity, and transparency. Equity, bonds, or commodity futures contracts are all traded on similar exchanges or through the same market makers and brokers. Digital assets, by definition, live in their own, newly created corner of the world and, therefore, accessing them can be difficult. The institutional world is asking for an all-in-one bridge that would facilitate access to digital assets while also managing cybersecurity risk, custody risk, liquidity and all the relevant operational risks on their behalf.
In the last two years, the institutional solution that strikes this fine balance has finally arrived in Europe under the name of physically-backed digital assets exchange-traded products ("ETPs").
Investing in digital assets – the access points
There are many ways to invest in digital assets. Each one comes with its pros and cons, these include:
direct holdings
- personal wallets
- account on centralised crypto exchanges
- hot or cold wallet with custodians
synthetic exposure
- futures or swaps
- futures backed ETPs
- structured products
physically-backed wrapped solutions
- close-ended funds
- physically-backed digital assets ETPs
This is a long list, right? The choice can be a bit overwhelming. This is why we have recently released our latest WisdomTree Insights, ‘A New Asset Class: Investing in the Digital Asset Ecosystem’. In this report, we discuss, in detail, the pros and cons of these many different access points for an institutional investor. The results of the analysis show that:
- Direct holdings are mostly kept in hot wallets, which are always connected to the internet and, therefore, open to cyber-attacks and hacking. Furthermore, they do not plug at all into existing trading or portfolio management systems.
- Physical exposures through direct investment stored with a custodian in a cold wallet are very tedious to set up correctly and manage daily.
- Synthetic exposures can be useful when leverage is needed, but they suffer from a large performance drag due to the negative roll yield of Digital Asset futures. This negative roll yield is very often higher than 10% a year, i.e. create a 10% per year drag on the performance.
- Close-ended funds suffer from high fees and extremely large discounts and premiums to net asset value. The tracking error and difference of those products are therefore very poor.
This leaves physically-backed ETPs, which appear to be the most robust and easiest to set up for a long-only institutional investor. They combine an easy operational setup and trading with security and efficient tracking. This is one reason why institutional flows in such products have significantly picked up as the product range has become more numerous and available via more venues.
Selecting the right digital asset ETP for your needs
Physically backed digital assets ETPs are new, though if you know how a gold exchange-traded commodity (ETC) works, then you understand the core concepts. When selecting between various ETPs, investors must consider the unique characteristics of each potential product. Investors could use the below holistic framework to approach their selection:
1. Security & custody
The number one concern when it comes to digital assets is cybersecurity. Crypto hacks make the news regularly, and so it is often front of mind for investors. However, in almost every single case of digital assets being stolen, the asset was stored in a hot wallet. The gold standard is storage in a cold wallet (i.e. where the private keys are stored somewhere that is not connected to the internet), managed by recognised custodians for institutional investors.
Having a safe custody solution and a robust process for approving any transfers is critical. Investors should pay attention to the custody provider, the storage solutions, their relationship with the crypto ETP issuer and the security practices for transferring coins in or out of the wallet.
2. Issuer & product structure
Choosing an issuer with recognised expertise in creating and running physically-backed listed financial products and a track record in managing their trading and liquidity, particularly in a crisis, can deliver important peace of mind to investors.
To mitigate the risk, it is also important to see if the issuer has a diversified business and range of products (not only digital assets) that can support periods where digital assets are down and out of favour.
3. Cost of holding
For physically-backed digital asset ETPs, all the direct costs should sit in the total expense ratio (TER) of the ETP. There should not be any other hidden costs. The lower the TER, the fewer coins the issuer takes and the more coins per share are left for the investor.
Trading costs are also part of the cost of holding. Secondary market bid/ask spreads are impacted by many factors: the liquidity of the ETP on the exchanges, the depth of the order book, volatility profile of the coins, inventory level, authorised participants' (APs) ability to source liquidity, and the number of market makers etc. For most efficient trading, it is always best to discuss with the Capital Markets team of the issuer to request an analysis when planning for large trades.
4. Lending & staking
For equity ETFs, investors have become familiar with security lending. This feature can also apply to digital assets ETPs – but not all. Essentially how this works is that the coins that should be held as backing to the product are lent out to counterparties in exchange for additional yield. This additional yield could subsidise the issuer, enhance the product's performance, or both. This activity can, however, be very risky with additional credit/counterparty risk vis-à-vis "unknown" entities the coins are lent to – not to mention the additional process risk with lent coins moving out of cold storage and into hot wallets. In some cases, this lent amount can be collateralised.
Certain physically-backed crypto ETP prospectus' allow for crypto lending, while others do not. Therefore, investors should check the details accordingly with the issuer.
Staking, on the other hand, is very different to lending. It is a unique feature of certain Digital Asset networks and, therefore, of certain digital asset ETPs. Staking needs to be enabled on blockchain networks that use a Proof of Stake consensus mechanism2. Overall, staking is less risky than lending, even if the reward for staking can be as high or higher. However, the operational setup of the issuer to deal with staking is an important criterion when selecting an ETP tracking a Proof of Stake asset.
5. Primary and secondary trading ecosystem
How the APs trade the underlying coins to facilitate the creation and redemption of the shares within a crypto ETP is critical for a due diligence process.
When completing due diligence for the AP process, it's key for the issuer to be able to present the subscription/redemption process in detail and make sure the workflow is understandable to the investors.
6. Operational considerations for digital asset basket products
Digital assets are the most at risk when they are on the move since they have to come out of cold storage and move to a hot wallet. In the case of ETPs that are tracking not just one digital asset but a basket of digital assets, rebalancings are necessary to ensure that weight remain in line with the investment objectives. A robust and detailed process around those basket rebalancings is therefore a must.
Sources
1 www.washingtonpost.com
2 For a brief explainer on staking, see: www.wisdomtree.eu
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
Digital assets: ‘the government’ is not going to ban them2022 has seen a number of major public policy shifts for digital assets in the United States, United (UK) Kingdom and the European Union (EU). Far from banning digital assets, the new announcements are overt and positive signs that digital assets are being integrated into existing regulatory and legislative frameworks in different parts of the world. Now that the scale and benefits of digital assets are too great to ignore, governments in these countries are now playing catch-up with Switzerland and Singapore. The latter now serve as home to thriving digital asset industry clusters due to the clear regulatory and legislative positions established years ago.
The digital asset ecosystem is not the wild west that it once was. It is maturing, becoming safer and more could benefit as it becomes more regulated. This is the same process that many technologies go through as they become ‘part of the furniture’1. Using these networks will become second nature just as many don’t think twice anymore when using Global Positioning System (GPS) to navigate a city they’ve never been in before.
Scale that has become impossible to ignore
The digital asset ecosystem reached an all-time high of over USD$3 trillion in market capitalisation in November 20212. The benefits that this new technology brings – such as increased speed, accessibility and transparency – are becoming too great to ignore. At the same time the potential risks – particularly related to cybersecurity and criminal activity – are now well known.
The first major announcement came out of the United States of America (USA). In March, the Biden Administration announced the “Executive Order for the Responsible Development of Digital Assets”3. This is a finely-worded policy document that clearly lays out potential benefits and risks from digital assets then tasks various federal agencies to investigate and provide recommendations on how the USA can continue to be, “a global leader, growing development and adoption of digital assets and related innovations”, and, “defend against certain key risks, necessitate an evolution and alignment of the United States Government approach to digital assets.”
Not wanting to be left behind, the United Kingdom’s Treasury announced their intention to make the UK the ‘global crypto hub’4. While details are scant, some initial initiatives include, “legislating for a ‘financial market infrastructure sandbox’ to help firms innovate, a 2-day Financial Conduct Authority (FCA)-led ‘CryptoSprint’ event in May 2022, working with the Royal Mint on a Non Fungible Token (NFT) and an engagement group to work more closely with industry.”
Finally, the Markets in Crypto Assets (MiCA) proposal is snaking its way through various working groups in the European Parliament5. While the actual wording of this proposal is under constant review, if it continues to progress it will eventually be reviewed by Parliament, the European Commission and Council of Europe en route to providing the EU with a unified framework for regulating digital assets.
Governments deal with new technology in different ways
Each government will take a slightly different approach based on their own domestic political structure, how developed the digital assets industry is in their jurisdiction and other policy imperatives. The approach can take time to develop and can also evolve over time. This is no different to previous waves of technological change. Railroads went through a round of legislative efforts in the United Kingdom during the 1840s to raise safety standards of train carriages and lines6. So too did car safety in the United States due in part to the work of Ralph Nader in the 1960s7.
The most recent major technology wave, the Internet, is still playing out. One facet of internet governance, data protection and privacy, is handled very differently in the United States. Where there is no federal digital privacy legislation, to the European Union and its General Data Protection Regulation and Directive (GDPR). This didn’t happen overnight - it took two decades for the GDPR to be developed and implemented. Another example can be seen in the way that speech is regulated online. Section 230 of the US Communications Decency Act has provided online service providers with a safe haven for the liability linked to the conduct of their users on their platform. This was put in place in the 1990s and is part of the reason so many social media companies are US based. Contrast this with the EU Digital Services Act8, which is a relatively new initiative that will only make its way out of the EU apparatus in 2024 – around 30 years since the commercial internet arrived.
There can be many homes for the digital assets industry
For years a recurring question about digital assets has been “what happens if ‘the government’ bans it?”. It turns out that there are many governments – no single one chooses how new technology will be used worldwide. This is particularly the case for open source software in an internet connected world. Far from banning digital assets, many governments are now competing to be ‘the home’ of the businesses that use this technology. The governments who manage to strike the right balance of measures will be home to a new wave of technological change – including the jobs, tax revenue and well-being that come with it.
Sources
1 www.collinsdictionary.com
2 www.coingecko.com
3 www.whitehouse.gov
4 www.gov.uk
5 www.europarl.europa.eu
6 www.orr.gov.uk
7 www.nytimes.com
8 digital-strategy.ec.europa.eu
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
CRYPTO INDEX 100 - WEEK CHARTHi, today we are going to talk about CRYPTO INDEX and its current landscape.
We can observe at this timeframe, a confluence of technical factors, that entail a setup which might drive this asset to a new movement. The details of our analysis are highlighted in the chart above.
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NASDAQ and CryptoindexAs you can see on the comparison chart of Cryptoindex and the NASDAQ. The cryptocurrency market is practically no different from the market of traditional classical instruments.
On the chart, one can see the moment when Bitcoin did not meet expectations of growth and went down. This can also be seen on the chart.
We will follow the charts of traditional classical instruments and again wait for a general correction.
Cryptoindex correction?Hello, our dear community!
The trend that follows the last days tells us that in the near future it will be a quite possible price correlation.
The CryptoIndex also tell us the same on the 30 day period run.
Now the Bitcoin rate is fixed at $9200 and stably stays at this level. It is not yet possible to overcome the threshold of $10,000 if whales do not raise the price on any exchange.
The hottest news from Libra and launching of TON will also help direct growth upwards, which may appear on the index chart.
